Definitive Guide to Hiring in Saudi Arabia

Hiring in Saudi Arabia

Hiring employees compliantly in Saudi Arabia means doing it yourself or using an Employer of Record like Global Expansion. You should be careful using independent contractor agreements in Saudi Arabia so that you don’t run afoul of employment laws. To hire an employee compliantly and offer them mandatory benefits and compliant agreements, you can:

(a) Establish your own new legal entity, banking, accounting and payroll service in Saudi Arabia; or

(b) use an Employer of Record like Global Expansion who can handle all of the details for you.

Labor Laws in Saudi Arabia

Employee Probation Period

• An employee can be subject to a probationary period of no more than 90 calendar days and during this period the contract can be terminated without notice.
• Subject to the employee's consent, this period can be extended up to 180 calendar days (i.e. six months in total)

Annual Leave in Saudi Arabia

• As per Saudi Labor Law, Employees are allowed to have Twenty-One (21) days paid annual vacation.
• If your employer's employee contract is less than this, you can request it to increase to 21 days.
• Muslim employees are generally entitled to Hajj leave after 2 years of continuous employment. The leave may be up to 10 days and can only be taken once in 5 years with the same employer.

Holidays in Saudi Arabia

Workers are entitled to paid holidays during Festival (public and religious) holidays. These include memorial holidays and religious holidays (Christian origin).

Here is the full list of public holidays in Saudi Arabia:

Maternity Leave Saudi Arabia

• Female employees are generally entitled to 10 weeks of paid maternity leave, up to four weeks may be taken before the birth and at least six of the weeks must be taken after.

Paternity Leave Saudi Arabia

• Fathers are eligible for three days of paid paternity leave.

Sick Leave in Saudi Arabia

• Employees are generally allowed up to four months of sick leave, if they provide a medical certificate. 
• Sick leave is paid as follows: 
  • First 30 days: 100%
  • 31 to 90 days: 75%
  • 91 days to 120 days: unpaid

Working Hours in Saudi Arabia

• Normal working hours are 8 hours a day and 48 hours a week for all the employees.
• During the month of Ramadan, the normal working hours for Muslims are reduced to a maximum of 6 hours a day or 36 hours a week.

Overtime in Saudi Arabia

• All working hours performed during holidays and "Eids" are deemed overtime hours.
• Overtime is paid at the 150% of the regular wage rate.
• Overtime can not exceed 720 hours in a year.

Termination of Employment in Saudi Arabia

• Notice period is 30 days if an employee is paid on a monthly basis and 15 days (in all other cases)
• If proper notice is not given, the parties can agree to compensation instead.
• During the notice period, employees may use 8 hours of work time per week to find alternate employment.
• There is not notice period for definite contracts as it is rare to have a valid reason for ending a definite contract early.
• When an employment contract ends, an employee is entitled to an “end-of-service award” equal to one-half of one month’s wages for each of the first 5 years of employment and a full month’s wages for each year of employment thereafter, pro-rated for any partial year’s service
• An employment contract may be terminated in the following situations:
  • by mutual consent of the employer and the employee;
  • upon expiry of the employment term specified in the contract, unless the contract has been explicitly, contractually or statutorily renewed. Statutory renewal relates to the situation where the employee commences employment under a fixed term contract and continues to work after the original contract term has expired. In such a case, the contract will convert into an indefinite term contract and will not require further renewal;
  • when the employee reaches the age of retirement;
  • upon the occurrence of a force majeure event;
  • where the business permanently closes (i.e. permitted redundancy);
  • where the employer terminates the entirety of the activity in which the employee is employed (i.e. permitted redundancy);
  • for cause

Notice Period in Saudi Arabia

• Employees with indefinite term contracts are entitled to notice periods
• Notice period is 30 days if an employee is paid on a monthly basis and 15 days (in all other cases)

Severance in Saudi Arabia

• When an employment contract ends, an employee is entitled to an “end-of-service award” equal to one-half of one month’s wages for each of the first 5 years of employment and a full month’s wages for each year of employment thereafter, pro-rated for any partial year’s service.

Saudi Arabia Salary and Wages

13/14th Month Salary in Saudi Arabia

• No
• There is no statutory requirement to pay the 13th or the 14th month salary.
• Employees receive annual leave of 21 days at the standard rate.
• Employee bonuses are found in the civil service and some major companies that pay up to two months salary bonus.

• Employers must pay Saudi social insurance tax (GOSI) on behalf of their employees on a monthly basis.
• Social insurance contributions are paid monthly based on the basic monthly salary plus housing (paid or in-kind) with an upper limit of SAR 45,000, are computed at 2% for non-Saudi employees (note that this is not social insurance, it is an occupational hazard) and are paid by the employer.
• For Saudi employees, the employer must contribute 12% of the employee's salary to the General Organization for Social Insurance, and the employee contributes 10%
• The employer also pays accident insurance equal to 2% of the salaries paid for non-Saudi employees.

Immigration Saudi Arabia

• Saudi Arabia depends substantially on foreign workers for its labor requirements.
• However, the government is making concerted efforts to increase the number of Saudi nationals in the workforce and, consequently, considers the availability of Saudi national workers before granting a work visa to a foreign national.
• Work visas are issued to foreign workers who come to Saudi Arabia to work under employment contracts with local employers for a maximum initial period of two years.
• To obtain a work visa, an application is submitted to the Saudi embassy or consulate in an applicant’s home country together with a passport, a copy of the employment contract, a medical certificate and proof of professional qualifications.
• It takes approximately two to four weeks to obtain a visa after all of the documents are submitted.
  • The Work / Employment visa will allow a stay of between 14-90 days.
• On entry into Saudi Arabia, an application is then made by the employer for a residence permit (iqama) for the employee.
• An employee may work while a residence permit is being processed or renewed. It is possible to change employers with the approval of the existing employer.
• Foreign nationals may not carry out trading activities in Saudi Arabia.
• A foreign national who is a professional (for example, an accountant, engineer, lawyer or consultant) may conduct business in Saudi Arabia by setting up a professional partnership with a Saudi national, according to the professional partnership regulations.

Value Added Tax (VAT) in Saudi Arabia

• Value Added Tax (or VAT) is an indirect tax imposed on all goods and services that are bought and sold by businesses, with a few exceptions.
• The standard rate of VAT is 15%.
• Certain goods and services are zero-rated in accordance with the GCC’s Framework Agreement, which specifies some mandatory areas for zero-rating in all six GCC member states (including exports of goods and services outside the GCC, and the supply of qualifying medicines, medical goods, and investment metals).

Mandatory Benefits in Saudi Arabia

• These are mandatory benefits as postulated by law
• These benefits include probationary period, annual leave, public holidays, sick leave, maternity leave, paternity leave, notice period, overtime pay, and end of service award
• Mandatory benefits also include social security benefits.

Payroll Accrual in Saudi Arabia

Country Accruals Additional Information

Description Coverage

Social insurance contributions are paid monthly based on the monthly basic salary plus housing (paid or in kind) with an upper limit of SAR 45,000, are computed at 2% for non-Saudi employees (note that this is not social insurance, it is occupational hazard), and are paid by the employer. For Saudi employees, the rate is 22% and is paid by both the employee (10% = 9% social insurance + 1%unemployment insurance [SANED]) and the employer (12% = 9% social insurance + 2% occupational hazard + 1% unemployment

Payroll Accruals Additional Information

Accrued Benefits in Saudi Arabia

Why use Global Expansion to hire in Saudi Arabia

Establishing a branch office or subsidiary in Saudi Arabia can be time-consuming, expensive and complex. With such a robust labor market in place, one must pay great attention to detail when structuring employment because Saudi Arabialabor laws are complex.

The company also has a responsibility to comply with specific employment practices dictated by Saudi Arabia law to maintain its good standing as an equal opportunity employer.

Global Expansion makes it easy for you to expand into Saudi Arabia. We'll help you hire your candidate of choice, handle HR matters and payroll, and ensure that you comply with local laws without the burden of setting up a foreign branch office or subsidiary. In addition, you'll have complete control and direction over your employees.

We enable you to stay in control of everything. Our Saudi Arabia Global Professional Employer Organization (PEO) and Employer of Record (EOR) solution provides you with peace of mind to focus on running your company and the security to enter new markets.